Rising fuel costs have consumer confidence running on empty, a new survey shows. If costs continue to rise, economists fear that consumers will put the brakes on spending.
The confidence of U.S. consumers dropped to a five-week low last week in the wake of the highest gasoline prices in almost three years, the Bloomberg Consumer Comfort Index showed.
On May 3, the average cost of gasoline reached $3.98 per gallon, its highest since July 2008.
The news for retailers was especially chilling; the buying climate gauge slumped to its second-lowest level in 15 months, according to Bloomberg. Economists fear that the surge in fuel prices may prompt Americans to cut back on their spending, which makes up 70 percent of the economy.
"Surging gasoline prices and a difficult labor market are likely to dampen demand and serve as an impediment to growth in the second quarter, Joseph Brusuelas, an economist at Bloomberg, said in a statement, "Lower-income groups are caught in the vise of rising fuel costs and elevated unemployment."
More Americans filed first-time claims for unemployment insurance payments last week, pushed up by auto-plant shutdowns and other unusual events that normal seasonal adjustments failed to take into account, according to the Labor Department. Initial jobless claims surged by 43,000 to 474,000 in the week ended April 30, the most since August.
The combination of rising fuel prices and unemployment is sending seismic waves reverberating through the financial ecosystem.
Even though MasterCard Inc. -- the world’s second-biggest bank card network -- posted a first-quarter profit that beat analysts’ estimates as consumers stepped up spending , company officials are concerned by rising fuel costs and the labor market.
"I still remain concerned about housing prices and unemployment in the United States, about food and gas price inflation around the world," Ajay Banga, MasterCard's CEO, said during an analyst's call this week. "Overall, I would say I remain cautiously optimistic."